Nikkei 225 Tumbles Over 2% as Alphabet's AI Spending Plans Rattle Tech Investors

Japan's Nikkei 225 share average tumbled more than 2% on Friday, tracking a sharp overnight sell-off on Wall Street that was fueled by concerns over the escalating costs of artificial intelligence development. The negative sentiment was triggered by a significant drop in shares of Google-parent Alphabet, which reported plans for higher spending on AI infrastructure.

Market Reaction

The Nikkei benchmark was down 2.69% at 64,634.04 as of 0112 GMT, while the broader Topix index slipped 1.28% to 4,002.09, according to a Reuters report. Friday's losses extend a period of weakness for the Japanese market, with the Nikkei having lost more than 7% so far this month and entering correction territory last week.

AI Spending Jitters

The sell-off in Tokyo followed a downturn in U.S. markets, where the Nasdaq Composite shed more than 2%. The catalyst was a 7% plunge in Alphabet's stock after the company's latest report highlighted increased spending and cash burn tied to its AI ambitions, renewing investor anxiety about the sustainability of such heavy investment.

"Concerns resurfaced over whether heavy spending on AI infrastructure is sustainable after Alphabet shares fell sharply overnight," Kazuaki Shimada, chief strategist at IwaiCosmo Securities, told Reuters. Shimada added that the Nikkei's recent moves have been driven by overseas factors, but the trend could change as the Japanese corporate earnings season gets underway.

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Sector Performance

Technology and semiconductor-related stocks led the declines in Japan, reflecting their sensitivity to global tech sentiment.

• Chip-testing equipment maker Advantest fell 6.33%.
• Semiconductor manufacturing giant Tokyo Electron lost 5.43%.
• Tech investor SoftBank Group dropped 7.42%.

In contrast, some stocks supported by domestic demand proved resilient. Railway operators including Central Japan Railway and East Japan Railway posted modest gains, as did major shipping lines like Kawasaki Kisen and Mitsui O.S.K. Lines.